Social security pact with US likely to take time
22 Sep 2008, 0205 hrs IST, Himanshi Dhawan ,TNN

NEW DELHI: Even as PM Manmohan Singh will sign the social security agreement between India and France in his coming visit to Paris, a similar deal with the United States is likely to take some time in materializing.

The overseas Indian affairs ministry has been in "informal talks" with the US for extending the social security net to Indians. An agreement will allow Indians working in the US — under short term contracts — to secure exemption from contributing to the American social security.

"There is a high level of interest in signing the agreement with US because of the large number of professional Indians working there. We have had informal talks on the subject," a senior ministry official said.

US has asked for certain clarifications on India's social security system or employees provident fund to ascertain the extent of coverage.

"We have laid their reservations to rest about the comprehensiveness of the system. All working professionals pay EPF except for agriculture workers and those in the unorganised sector," the official said. In the US, the social security is funded through mandatory contribution from all working people and their employers (in a prescribed ratio) in order to provide multiple benefits like old age pension, disability insurance, health insurance and unemployment insurance.

Generally the contribution is in the form of a fixed percentage of income subject to a maximum lumpsum limit. If signed this could mean a major reprieve for Indians working in the US. According to conservative estimates, Indians holding H1B visas contribute $500 million to the US exchequer. Significantly, this does not include the legal migrants.

US has signed over 20 agreements with countries but it appears to be in no hurry to sign a pact with India. Workers are often posted to various countries by their Indian employers on short term contract and during this period they continue to make social security contribution in India as per Indian law. Yet, they are compelled to pay contribution under the host country’s legislation too.

Moreover, they do not get any benefit from the social security contribution made abroad, because most countries do not allow 'export' of social security benefit. Most countries also have a minimum contribution period criteria as a result of which if a worker stays abroad for a lesser period, the contribution made by him is lost. Similarly, self-employed Indians in these countries, despite having made contributions, are deprived of any benefit in case they relocate to India in old age, which is often the case.